چکیده انگلیسی

Thailand has experienced economic growth well above world averages from 1960 to the recent crisis. While the controversy over Thailand and East Asian growth has discussed the role of capital accumulation versus productivity, we analyze the general equilibrium interaction between productivity and investment in an intertemporal growth model. The high growth is understood as a prolonged transition path with gradual tariff reduction and endogenous productivity driven by foreign spillover feeding capital investment. Counterfactual analyses show how protection would have reduced growth with productivity and investment slowdown, while shock liberalization would have raised immediate growth with faster convergence to steady state.

مقدمه انگلیسی

Income differences across countries cannot be understood only as a result of different availability of production factors. The empirical evidence that capital stocks per worker explain limited part of the income differences among nations now is widely accepted. The attention therefore is turned to productivity and technology and productivity differences between countries are substantial, as documented by Hall and Jones (1999). Acemoglu and Ventura (2002) find that the world income distribution is remarkably stable over time. It follows that differences in income levels are permanent, while differences in growth rates are mostly transitory. A corollary to this is that miracle growth countries cannot produce miracles over long periods. Growth rates will decline again to world normals.
The sources of the remarkable growth in Thailand and East Asia have been controversial and empirical studies have constructed a horserace between factor accumulation and productivity growth. While the conventional view has recognized high productivity growth associated with openness as part of the explanation (Klenow and Rodriguez-Clare, 1997), both empirical (Young, 1994) and theoretical (Baldwin and Seghezza, 1996) studies have argued that capital accumulation has been the main driving force. This debate is hard to understand from a general equilibrium point of view, since both factor accumulation and productivity are endogenous. The conventionally calculated residual underestimates the productivity effect when productivity improvements contribute to higher capital accumulation. Hulten (2001) shows how this induced capital accumulation effect can be calculated. He reports that this measure of the productivity effect accounts for about 50% of output growth in the East Asian economies studied by Young.
The present paper addresses the growth process of Thailand in this context. We suggest that the interplay between accumulation and productivity is investigated in an intertemporal general equilibrium framework. Openness and trade policy are assumed to be important for productivity spillover and cost of capital goods. The focus is on endogenous productivity growth in transition towards long-run balanced growth. Thailand has had economic growth of about 6–8% and well above world averages from 1960 to the recent crisis, in transformation from a ‘rice economy’ to industrialization with labor-intensive exports.
The literature on endogenous productivity growth points to the role of research and development and innovation. But these sources of productivity growth do not seem to be of great relevance for Thailand. Resource input to research and development is concentrated to the most developed countries of the North. Innovation is the result of R&D and certainly requires advanced skills, again not characterizing the local growth process. Human capital development and skill accumulation are important ingredients in recent models of endogenous growth. While education and skill levels have been rising in Thailand, the low-tech labor-intensive industries do not indicate that this is a major growth factor. Our analysis addresses productivity growth generated by learning by doing, technology adoption and foreign technology spillover. Based on recent econometric evidence for Thailand, our understanding is that productivity growth has been related to the increased openness of the economy. Greenaway et al. (2002) supply broader evidence about openness and growth.
Thailand's growth experience is analyzed as an interaction between endogenous productivity growth and capital accumulation with increased openness of the economy. This mechanism explains the extended transition growth above long-run balanced growth rates. To investigate the transition path and the role of openness, we have developed an intertemporal, general equilibrium model with productivity dynamics that allows counterfactual analysis. The model describes an economy with macroeconomic stability, full employment of resources and flexible allocation of resources between sectors according to profitability. The assumptions are heroic, but then Thailand has enjoyed an impressive growth record with the ability of holding macroeconomic balance and reasonably full utilization of resources.
The model calibration is based on the combination of a social accounting matrix (SAM), econometric evidence and stylized facts of the Thailand economy. The calibration reproduces a transition growth rate above the assumed steady-state growth rate of 5.5% for the period 1960–1995. The establishment of the transition path explains the prolonged growth of the economy above world normals, and gradual reduction of tariff barriers is an important ingredient. Based on the transition path, we analyze counterfactual developments of the economy that can throw light on the growth process. Since the role of openness is assumed essential for the productivity growth, we look at both a protectionist alternative and shock liberalization. Reduced openness has a negative impact on the overall growth rate due to reduced learning from foreign spillover. Shock liberalization in 1960 would have raised the immediate growth, but the convergence to steady state would have been faster.
Imperfect substitution is assumed between domestic and foreign goods. The substitution possibilities of the economy affect the growth paths. In experiments using higher and lower substitution elasticities in both exports and imports compared to the calibrated transition growth, we show how increased substitution possibilities strengthen the incentive to take advantage of cheaper capital goods in the future with gradual tariff reductions. When there is high substitution between domestic and foreign goods, immediate growth is lower, but the growth gradually picks up with cheaper capital goods and endogenous productivity growth with more trade.
Section 2 puts the analysis in the context of the recent literature on productivity growth, and discusses empirical studies of the growth process in Thailand. Section 3 outlines the productivity dynamics and Section 4 describes the full intertemporal model. Calibration of the prolonged transition is explained in Section 5 and the sources of growth are decomposed. Section 6 offers counterfactual analyses of openness, protection and shock liberalization, while Section 7 investigates the substitution effects on growth slowdown towards steady state. Concluding remarks are collected in Section 8.

نتیجه گیری انگلیسی

Thailand has experienced economic growth well above world averages from 1960 to the recent crisis. It is a challenge to understand the sources of this high growth path, and in particular why growth has not slowed down with assumed decreasing returns to capital. We develop an intertemporal general equilibrium model separating between agriculture and industry, and with open capital market and endogenous productivity growth to analyze the underlying adjustment mechanisms. Foreign technology spillover embodied in trade is assumed to be the driving force of the productivity growth, consistent with available econometric evidence. The high growth experience is understood as a transition path with interaction between productivity growth, openness and capital investment. Gradual reduction of tariffs is a key factor explaining prolonged transition. Counterfactual analysis shows how protection may have had serious detrimental effect on the growth rate due to productivity and investment slowdown with less foreign spillovers. On the other hand, shock liberalization would have raised initial growth and income level during the period studied, but would have given less stimulus to productivity growth over time.
The substitution possibility of the economy affects the growth path. In experiments using higher and lower substitution elasticities in both exports and imports compared to the calibrated transition growth, we show how increased substitution possibilities strengthen the incentive to take advantage of cheaper capital goods in the future with gradual tariff reductions. The standard understanding is that the small open economy with perfect capital market implies high growth transition quickly returning to the steady state. When there is high substitution between domestic and export goods supply, similar to the small open economy, resources are easily shifted out of exports to satisfy domestic demand under early transition. The worsening of the exports growth path will reduce early transition growth. The medium run consequences depend on the productivity dynamics. With the endogenous response of productivity to openness assumed here, gradual expansion of exports will raise productivity over time and keep up transition growth.
Our analysis contributes to the literature evaluating short and long-run effects of trade liberalization. Diao et al. (1999) show how trade liberalization may give short-run welfare gain, but long-run welfare loss in Japan. Their explanation is that liberalization gives domestic industrial expansion, but then crowds out foreign spillovers over time. Compared to Japan, Thailand's trade protection has concentrated more on industry than agriculture. Rauch (1997) finds that trade liberalization in Chile gives short-run growth decline, but long-run welfare gain. In his model, trade liberalization gives specialization in traded goods with productivity growth, but immediate contraction in the non-traded sector. In this Thailand model, industry and growth is hurt by protectionism in the short and the long run, over time the effect is driven by the relationship between openness and productivity growth. It is a challenge to investigate more closely the dynamics of the productivity relations assumed here and factors affecting technology adoption and learning from abroad. An alternative dynamic formulation with multiple equilibria is analyzed by Stokke (2004).